Prime Minister Dean Barrow’s Address Business Forum “Partnering for Growth” at Old Belize Pavilion Print E-mail
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Thursday, 08 November 2012 00:00

PM Hon. Dean BarrowMr. Master of Ceremonies, Rev. David Goff, Distinguished Members of the Business Community, Ministers of Government and Members of Cabinet, Chief Executive Officers and other Members of the Public Service, Other Invited Guests, Representatives of the Media, Ladies and Gentlemen:

It is with great pleasure that I welcome you to this the second Business Forum, the purpose of which is to provide an opportunity for Government and the Private Business Sector in Belize to continue the open dialogue on ways to expand incomes, jobs and the level of business and economic activity generally. All this, of course, with a view to accelerate the social and economic development of our country, and to improve the quality of life of every resident of Belize.

There have been changes since we met here last year, some clearly positive, others clearly undesirable. At the same time, many things have not changed, with some significant constraints to our development, some of these outside of our control, remaining stubbornly in place. Nevertheless, we continue to be reassured in countless ways that we are able to rely on the resilience and inventiveness of the Belizean people, and on their capacity, even in these trying times, to live all they can - to laugh, to have fun, and to support each other whenever and wherever support is needed.

On the positive side, our economy has continued to grow, although that growth is both below desirable rates and below our potential capacity. Last year’s economic expansion was about 2.5%, and there will be some uptick this year with the Central Bank projecting as much as a full percentage point in GDP increase. This mainly reflects a combination of recovery in the agricultural sector from previous storm damage, and a phenomenal rebound in long-stay tourism visitor arrivals. The prospects for a resumption of large-scale farmed shrimp production appear to be favourable, and I am aware that discussions are underway with a view to bringing electricity output from the Blair Athol Power Generation facility onto the national grid, to help offset part of the high prices that Belize Electricity Limited is currently paying for its wholesale purchases. The recent entry of a large foreign refiner into our sugar industry is expected to make a substantial difference to jobs and incomes in the north, going forward. Major expansion in processing capacity is anticipated, at least doubling the demand for sugarcane in the near term. We are also looking forward to the commencement of substantive work on the establishment of sugar processing capacity in the western part of the country by another foreign group, which means even more expansion in production and in the supply of electricity from bagasse.

On the negative side, there has been a faster than expected decline in petroleum production and exports, and this has had a substantial impact on the fiscal accounts. The ongoing seismic surveys and the current drilling operation in the northwest of the country have not yet produced a replacement for BNE production at Spanish Lookout.

At the global level, economic activity in the developed countries that are our major trading partners remains subdued, with the ongoing effects of the Great Recession take their toll now on Euro-area countries, even as the UK and the US face continuing fiscal difficulty. Low levels of economic performance in the developed countries feed through to us via reduced foreign investment flows (particularly in tourism-related construction), and via a reduced flow of remittances from Belizeans abroad to their families back home. Reduced performance is also manifested in lower levels of Government to Government development assistance flows. Canada remains a bright spot in the north though, and we would like to thank the Canadian Government, along with the Government of the United States, for their assistance in our anti-crime efforts.

Crime, of course, remains the major domestic issue at this time. And this is on top of the clear development challenges we have been facing, but addressing, in the provision of infrastructure, health services, education, and sustainable management of our natural resources. Minister John Saldivar will shortly bring you up-to-date on where we are with our new crime fighting efforts. Let me just say, then, that we fully recognize that crime, and in particular violent crime, is a societal evil that is also a major obstacle to the growth and even the maintenance of business activity levels; that security is now a critically important business cost area; that there is no way we can give in to a climate that holds business and entire communities hostage. So Government will wheel and come again. We have re-strategized, we will re-mobilize, we will re-operationalize. We believe we have finally found a way to get the shooters off the streets and into an institution. So together with our social partners and the citizenry, we will employ new means to lick this problem. And in so doing, we will utilize every resource, spend every dollar, pay every price until once and for all we get this thing under control and take our country back.

But returning to the positive, there is one particular area that I am very happy about: and it has to do with the Steering Committee that had been established at the first Business Forum to maintain the public sector: private sector dialogue, to enhance the collaboration and cooperation between the two sectors, and to seek to address business sector issues as they arise. This Steering Committee has been expanded from its original 8 members (4 each from the public and private sectors) to 10 (5 each, with the addition of a focus on the services sector, and the inclusion of the Ministry of Economic Development); the single public sector chairmanship has been transformed into a joint public – private co-chairmanship; and the operation has been re-named the Economic Development Council, given the wide-ranging nature of the work that has been undertaken. I am particularly pleased with the step-up in responsiveness from both the public sector agencies and the private business sector that has come with the appointment of Mrs. Amparo Masson to the EDC Secretariat, which is located in my office, so that I can remain close to the process. Mrs. Masson has demonstrated a great deal of drive and initiative, and I am really quite pleased with the results so far.

As I indicated last year and repeat now, the main focus of this Forum is, through ongoing and intensive collaboration and cooperation between the public and private sectors, to identify and implement those approaches, activities and operations that will raise the level of business activity in Belize on a sustainable basis; that will expand jobs, incomes, and business profits; that will improve and expand the efficiency and effectiveness of public sector operations; and all with a view to improving, as rapidly as possible and on a sustained basis, the living levels and quality of life of all residents of our country. It is of vital importance that every individual in this country feel that he or she has a stake in the maintenance of all that is good and wholesome in our society and its institutions; it is vital that opportunity exists for all to achieve a good living provided they are prepared to make the effort; and that crime, violence, corruption and other illegal activity be strongly denounced and resisted. The quality of life of all of our people must be improved as a good in and of itself. But also so that those successful in business and the professions may be able to enjoy the lifestyles they have worked so hard to afford.
Prime Minister Dean Barrow’s Address

Business Forum “Partnering for Growth” at Old Belize Pavilion

Let me say a word about corruption. The private business community and private individuals have a particular responsibility in the area of corruption, which continues to be a serious issue. I am serving notice that the anti-corruption drive in the public sector, which we are renewing, must deal equally with those who seek compensation for their “special services” and those who pay that compensation.

Before highlighting some of the areas that the public – private sector dialogue has been looking at during the past year, let me set out briefly what we propose to do today, and how we propose to go about it. Following my address to you, we will have a series of short presentations by public sector officials on areas that we think will be of interest to you. Each presentation will identify issues and activities, and will hopefully give you a sense of where we are proposing to go in the particular area. We will then have a period of about 15 or 20 minutes for a question and answer session on the particular area. Because the time is limited, I will ask all those wishing to speak to be brief, and to keep your questions and comments short, so that we can get maximum participation. The session will be moderated by Mr Alan Slusher, and I warn you that he has my clear instruction to manage the interventions from the floor. The areas that have been selected for these short presentations are: agriculture and agro-industry taxation trade, investment and the business climate banking and finance crime.

Depending on how well time is managed, there may be opportunity for a few additional questions on some of the areas that I will mention subsequently. I would like to remind you, however, that the Public – Private Dialogue operation being managed at the level of Mrs. Amparo Masson and at the level of the Economic Development Council is a full-time operation, and that you should feel free to get in touch with the office, using the contact information that has been circulated, in respect of any area of legitimate operational difficulty that you might be having. Mrs. Masson and the EDC will do their best to help sort things out. Alternatively, you may seek to have your concerns addressed either directly through the particular public sector agency concerned, through BELTRAIDE, or through the Belize Chamber of Commerce and Industry. The important point I want to make is that you have somewhere to go if you are having a problem with any public sector operation, or if you are seeking help or guidance in establishing or expanding a new or existing business operation.

Let me now take a look at some of the things that we have been involved in since the last Business Forum, areas that have been of concern of the business community in one way or another.

Utility cost reduction

Because business cares most about the bottom line, the reduction in electricity and water rates, complementing the decrease in telecom tariffs, is arguably the most notable development since our last gathering. BEL rates were cut by 6% and BWSL rates by 7.2%. For businesses of all sizes and in all sectors, this represented a huge assist. Further, the three public utilities will together deploy capital investments of over 100 million in 2012/2013. This will help generally to stimulate the economy and drive growth, as well as improve services, efficiencies and productivity. And returning to particulars, this is the point at which to make some very important Telemedia announcements:

In October 2010, BTL doubled bandwidth for all its high speed Internet customers at no additional cost. Then in October 2011 it introduced a 128k Internet package for as little as $49 per month, with Government also removing the 12.5% GST. To top it off now, yesterday the BTL Board of Directors agreed that the company will once more give its Internet customers increased bandwidth at reduced prices. Accordingly, the 128k Internet speed will go from $49 per month to $25 per month. All other DSL Internet speeds will double, but for the same price as current. As examples, 1 megabit which currently costs $300 will now sell for only $140 per month. And 2 megabit that is sold now for $500, will cost only $240. The reductions will take place later this month, and simultaneously the 206 schools countrywide that already receive free Internet from BTL will have their free speed doubled. All this against the backdrop of the 4g rollout, which will be fully operational by December. How about that for helping with the business climate, and let's give BTL chairman Net Vasquez a round of applause!

Taxation Review
We have sought the assistance of the IMF to review our entire tax system and to make recommendations for its restructuring and improvement. We made this request some time ago, and there had been some delay in the IMF’s response owing to pressure for the same service from other member countries. I met with senior Fund staff on another matter about a month ago, and the tax review for Belize is now a priority item. You would be aware that there are multiple objectives to be achieved here. There is a need for equity across the society in the payment of taxes, there is a need for revenue for the Government if it is to be able to carry out its functions, there is need for a tax system that encourages and promotes investment and economic growth, and the tax system needs to be as simple to understand, administer and enforce as possible. I want to emphasise that the exercise is intended to produce recommendations, which would then have to be tailored to suit our requirements and circumstances. At some point in this process, we will be working in our fiscal incentives overhaul, in order to ensure that the objectives of providing fiscal incentives, in particular the imperative of creating jobs, are being achieved. These reviews have been driven jointly by both the public and private sectors.

GST Review
We will be reviewing the structure and operations of our General Sales Tax system is order to ensure that it is meeting its objectives, and that it is meeting those objectives in an efficient and effective way. We are presently in the process of selecting a qualified consultant to advise on the review process. Important issues behind this review have included declining net yields in the face of increasing transactions volumes, issues on both sides in relation to refunds, and issues in relation to registration.

There is clear need for the community to be able to transact business with the public sector utilizing telecomputing facilities. While many Government agencies have computerized parts of their operations, most interactions with the general public, including financial transactions, require a physical presence. We are now in the preliminary stages of developing an approach to plan and manage the transition from manual to computer-based systems across Central Government, and including public sector agencies whose operations interact with those of the central Government.

Public Sector Transformation
This will involve the re-engineering of Government agency services in ways that result in transparency and accountability in the performance of functions, and that require the ongoing measurement of performance against objectives. It will also allow for the ongoing assessment and evaluation of both individual and agency performance.

Small Business
Support Services
Particular attention is being paid to supporting small and medium-sized enterprise establishment and development. BELTRAIDE is in the process of establishing a Small Business Development Center (which you can ask Mr. Michael Singh about); conversations are about to start with the utility companies in relation to special services and special payment arrangements for qualifying small business enterprises (a start has already been made with BTL); the commercial banks are being asked to structure special service packages for small business enterprises; and, where a small business enterprise is engaged in importation, the Customs Department will be asked to evaluate the possibility of introducing special clearance arrangements under its ASYCUDA system.

Tax Relief
A number of tax relief proposals have been put forward. These include removal of the existing 20% cap on Business Tax carry-over losses; personal income tax exemption on shareholders’ income from businesses with sales of $5 million or less; full or partial exemption from business taxation for firms that re-invest all or part of business profits; and requiring all incorporated businesses to file annual audited financial statements. These issues have so far only been discussed in a preliminary way, and for me, decisions thereon should await the comprehensive tax review we have agreed, or at least the Budget exercise for the next fiscal year.

Mortgage Guarantee Programme
The proposal here is for Government to provide a repayment guarantee of up to 10% of a housing mortgage loan from a commercial bank or DFC (or other approved lender) for first time buyers of residential property to be owner-occupied provided that the original loan amount does not exceed $100,000. Loan repayment by the borrower would first take out the Government-guaranteed portion of the loan. Loans would be extended on normal commercial bank/DFC lending criteria. The intention would be to assist first time buyers experiencing difficulty in raising their 10% contribution, so that the lending institution would then be in a position to provide a 100% housing mortgage loan. It is thus with great pleasure that I announce today that Government has actually earmarked an initial $3.5 million for the programme. This would assist a minimum of 350 borrowers with their equity part of the total equation, which would in turn represent an aggregate sum of $35 million in new housing construction.

Export Credit and Export
Credit Insurance Programme
The EDC is planning to consult with the private business sector and the banking community on the likely demand for and feasibility of providing credit and credit insurance facilities to exporters, in order to enable them to improve their export competitiveness.

Superbond Loan Terms Restructuring
After a comprehensive debt sustainability analysis in April of this year, GOB announced in June its intention to seek debt relief from the holders of Belize's 2029 bonds. On August 8th, our liability management team published three options for a sustainable debt exchange offer. These indicative scenarios have formed the basis for ongoing negotiations with a Creditor Committee and with non-Committee Bondholders over the last 10 weeks. While GOB made a good faith partial payment of the August coupon, no further payment can be made until an equitable fix is agreed between Belize and the Bondholders. I am grateful for the expressions of support for the restructuring process made by the BCCI and the EDC after meetings with our team. As the negotiations continue, our stance remains resolute: for any outcome to be acceptable, it must be based on reasonable, realistic and above all, sustainable assumptions.

Of course, our team will re-engage with business community and other leaders as soon as there is, or is not, final consensus on new terms for this debt.

Also important in this connection is the fact of a special technical assistance programme being conducted by the IMF at Belize's request. The intention is to bolster our debt management capacity, and the experts from the Fund's Capital Markets Division are in country already to execute the mission simultaneously with the 2012 Article Four Review.

We are currently preparing terms of reference to be used to seek the assistance of one of the international agencies to examine our seaport facilities and operations and to make recommendations for long-term developments in this area, taking account of our location, our strategic needs, and the foreseeable evolution of bulk transportation.

Industry Restructuring
Public sector effort is currently underway, once again, (though you wouldn't believe it the way some people have been behaving) to assist the players in the citrus industry to sort out their issues. We must maintain and expand employment, incomes and foreign exchange in this very important sector.

I want to end by saying that I am entirely satisfied that this Business Forum has been an excellent initiative. The Business Forum Steering Committee/EDC has been meeting every two or three weeks since the last Plenary. And just the excellent formal and informal working relationships that have developed among its members alone are worth the price of admission. The Secretariat, operating out of my office, has intervened in a number of individual cases; and while we have not been able to provide the desired solutions every time, the fact is that there has been this tremendous  improvement in the relations between the public and private sectors over the past year, and far greater realism and understanding on both sides.

Of course, I am the first to concede that by the next time we meet we will have to be able to enumerate a far longer list of deliverables that have actually been achieved. You, in the private sector will thus challenge us in the public sector, to do more, and vice versa. And in that context let me just make one last point. There is currently $131m in excess liquidity in the banking system. And while there is still the issue of a widening spread between deposit and lending rates, the fact is that the latter is at an historic low of 12.23%. So in terms of both the quantity and cost of capital, the winds are in the private sector's sails. Plus, there is foreign exchange aplenty. Surely, then, there is opportunity for more entrepreneurship, ingenuity and business community can-do. I say very simply that the chances should not be allowed to go begging.

On behalf of the public sector, then, I recommit my full support to you in the private sector, and to the continuation of this exercise. I am sure that the fact of my NGO and Private sector picks for ministerial appointments, was lost on no one. Therefore, I signal in every way that I am intent on walking the walk. And in the interest of the development of our country, I believe it is a journey we make together in lockstep.